Financial Post: Outlook for Canada's Economy still far from certain

Outlook for Canada’s job market — and economy as a whole — still far from certain

The latest pieces of Canada’s economic puzzle will fall into place this week — but the big picture may look only slightly better than in past months.

While a surprisingly big surge in the U.S. employment in April reflects growing confidence in that country’s recovery, the outlook for Canada’s job market — and the economy as a whole — is still far from certain.

After posting a strong 42,900 gain in hiring during March, few analysts expect that momentum to follow through into last month’s employment report.

Instead, Statistics Canada on Friday will likely report between 16,000 to 20,000 positions were created in April — with the jobless rate staying at 6.9%.

“March hiring was impressive, but much less so in that it came after a string of poor results, leaving employment up only 9,000 per month in the last half year,” says CIBC chief economist Avery Shenfeld.

“The spring will, therefore, put the trend to the test.”

The latest pieces of Canada’s economic puzzle will fall into place this week — but the big picture may look only slightly better than in past months.

While a surprisingly big surge in the U.S. employment in April reflects growing confidence in that country’s recovery, the outlook for Canada’s job market — and the economy as a whole — is still far from certain.

After posting a strong 42,900 gain in hiring during March, few analysts expect that momentum to follow through into last month’s employment report.

Instead, Statistics Canada on Friday will likely report between 16,000 to 20,000 positions were created in April — with the jobless rate staying at 6.9%.

“March hiring was impressive, but much less so in that it came after a string of poor results, leaving employment up only 9,000 per month in the last half year,” says CIBC chief economist Avery Shenfeld.

“The spring will, therefore, put the trend to the test.”

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The volatile employment data have swung from a loss of 44,000 in December, to a gain of 29,400 in January, and then a 7,000 decline in February.

The rate of job growth “has been lackluster this year, despite the healthy pace of real GDP growth in the second half of last year and elevated hiring intentions among business,” said Dana Peterson, an economist at Citi Research.

“The unusually severe winter, resurgence of geopolitical risks and a brief period of EM [emerging market] weakness likely delayed hiring at the start of the year.”

In the United States, where April employment numbers were released last week, the economy added 288,000 jobs during the month, the biggest jump in two years, and that pushed the unemployment rate down from 6.7% to 6.3% — the lowest level September 2008.

Economic growth in the U.S., like Canada, was hampered in the first quarter 2014 by severe weather conditions at the start of this year. But the April labour report “provides further reason for optimism that the weakness at the start of the year was temporary and is unwinding,” says RBC economist Paul Ferley.

“Indications of a likely rebound in the second-quarter growth contributed to the Fed announcing another reduction is asset purchases.”

For Canada, another big economic indicator will come Tuesday when Statistics Canada delivers its latest balance of trade report.

The trade balance swung to surplus in February of $290-million, after a $337-million deficit the previous month. That was the first surplus in five months, and the consensus is that the March report on Tuesday will also show a bigger surplus, likely around $500-million.

“Strong energy exports, driven by firm prices for both oil and natural gas products, have helped bring the trade balance to surplus,” CIBC said in a note.

“Auto shipments, too, are likely to see an increase, with sales edging higher stateside in March.”

Meanwhile, Thursday’s housing starts data for April should also be strong, “aided in part by the return to more normal seasonal weather,” said Capital’s Mr. Madani.

The average forecast is 175,000 starts, up from 156,840 in March.

Outlook for Canadaâ€™s job market â€” and economy as a whole â€” still far from certain | Financial Post(external - login to view)